Thursday, 29 August 2013

I’d just gone on holiday when the
report of the House of Commons Transport Committee, “Cost of motor insurance: whiplash”emerged but have now had time to study
it. What a cracking good read, especially for those of you who wonder about the
integrity of the statistics you hear and see about the cost of the
‘compensation culture’.

For a long time motor insurers have
battered us with stats to prove that vast numbers of fraudulent claims are
generating unnecessary cost to the motoring public, making fat-cat lawyers
fatter and generally wreaking havoc within a system that the insurance industry
could otherwise run in a scrupulously fair and efficient manner…

The Committee set itself the
question, amongst others:

“Whether it is correct to say that the costs
of whiplash claims add £90 to the average premium and, if so, what proportion
of this additional cost is due to “exaggerated, misrepresented or fabricated” claims?”

Having looked at various data
gathered by government departments the Committee observed:

“It is apparent from the information now
provided by the government that the number of whiplash claims has fallen since
2010-11 and is now lower than at any time since at least 2007-08.”

So, what did insurer
representatives have to say? Some of the
exchanges between Committee Chair Louise Ellman MP and, first, James Dalton,
head of motor insurance at the ABI are highly entertaining:

“Q147
Chair: …We have
heard very loudly over a long period of time from the Association of British Insurers
that a large proportion of claims are fraudulent or exaggerated. Are you
telling me that you can’t give us a figure?

James Dalton: I can give you a figure for fraudulent claims.

Q148
Chair: What is
that figure?

James Dalton: The figure for fraudulent claims is around 7%.
That doesn’t take into account exaggerated claims. In terms of the issues that
we are focusing on in this Ministry of Justice consultation in relation to
improving medical evidence—

Q149
Chair: Mr Dalton,
you are not talking to the Ministry of Justice; you are talking to the
Transport Select Committee. I am putting a question to you because I want more
information about statements that the Association of British Insurers, whom you
are here to represent, has made.

James Dalton: As I said, 7% is about the number of known
fraudulent claims, but we don’t know and it is very difficult to capture how
many exaggerated claims there are very difficult to capture how many
exaggerated claims there are.”

Perhaps David Fisher, catastrophic and injury claims technical
manager at AXA Insurance might be more help:

“Q154
Chair: You are
taking your information from your reading of medical reports rather than an examination
of claims that have been made to your company.

David Fisher: Obviously all the claims will be examined.

Q155
Chair: Have they
been examined?

David Fisher: Yes; well, not all the claims. We do sample
claims and that drives the low-speed impact and the phantom passenger figure
that I have given of 15%. Exaggeration claims, unless they go to court, are more
difficult to identify.

Q156
Chair: But, in
your evidence, your company or you talk to us about the compensation culture.

David Fisher: Yes.”

So, no. The Committee reached the
conclusion that:

“There is no authoritative data publicly
available about the prevalence of fraud or exaggeration and no consensus about
what constitutes fraud. The government
has described the UK as the “whiplash capital of the world” but this cannot be
conclusively proved or disproved from the information available.

There is scope for the insurance industry to
provide better data about fraudulent or exaggerated claims so that there is a
better evidence base for policy decisions.”

It’s nothing new to those of us
in the industry that insurers create their own statistics one way or another. Director of Claims at Aviva, Dominic Clayden was questioned by Karen Lumley MP:

“Q182
Karen Lumley: How do
they get the information that these people have had accidents? Do they get them
from you?

Dominic Clayden: No. Whether it is a claims management company
or whatever, a fraud ring doesn’t—

Q183 Karen
Lumley: I am not
talking about a fraud ring; I am talking about people who get whiplash. How do
people get hold of them?

Dominic Clayden: You are probably best to ask the people giving
evidence later. My understanding is that it is by advertising.

Q184 Karen
Lumley: You don’t
sell details on to them?

Dominic Clayden: Not to accident or claims management
companies, no.

Q185
Chair: Are you
absolutely sure about that?

Dominic Clayden: Do I refer claims to solicitors? Yes.

Q186 Karen
Lumley: Do you
sell those details on?

Dominic Clayden: Not since the change in the law in that
situation. I do not receive a referral fee.

Q187
Chair: But you
did before then.

Dominic Clayden: Absolutely. We have been a strong advocate of
the ban on referral fees and the reduction of the legal fees that go with it.
It is the nature of the system. The reality is that, to remain competitive in a
market where something is legal, we referred and took a referral fee. We still
refer people to solicitors but we do not take a referral fee.

Q188
Chair: We have
had quite a lot of evidence saying that insurers themselves often generate
claims. The Government have said that they would like to see you, the insurance
companies, address behaviours that encourage excessive and unnecessary claims
within their own business models. It appears that the Government think that you
are the people who are generating
the claims. Are they wrong?

James Dalton: As Dominic has said, the system has changed
very recently.

Q189
Chair: But before
it changed you were guilty of this, were you?

James Dalton: The industry has long said that there is a
dysfunctional compensation culture in the UK
and that we are part of the problem.

Q190
Chair: What I am
putting to you is that part of that dysfunctional system is the behaviour of
the insurance companies. That is what the Government say.

James Dalton: Yes; and we have admitted that the insurance
industry has played a part in that dysfunctional system, which is why we made a
very strong case for the banning of the payment and receipt of referral fees.”

To put it another way, having
been caught with their hands in the cookie jar, as Karl Tonks described it (See
Business as usual) insurers have now
cleaned up their act?

Er, well…no. The Committee went
on to hear about pre-med offers and
reported:

“We were surprised to hear that insurers
will sometimes make an offer to personal injury claimants even before a medical
report has been received. We also note
that our previous recommendation on making the links between insurers and other
parties involved with claims more transparent has been ignored. Insurers must immediately get their house in
order and end practices which encourage fraud and exaggeration. If not, the government should take steps to
protect motorists.

Although it may make economic sense for an
individual insurance firm to settle a claim without medical evidence or to pay
out even if fraud or exaggeration is suspected, the industry as a whole is
damaged, and motorists pick up the bill in the form of higher premiums.”

Still market-making, then. Little
surprise that the Select Committee was sceptical about insurers’ claims that
premia would fall as a result of the costs cuts they had urged upon Government:

“We recommend that the Government explain
how it will monitor whether or not motor insurers honour their commitment to
ensure that any cost reductions resulting from proposed legal reforms are
passed through to consumers in the form of lower premiums.”

Will the ABI respect the view of
a cross-party select committee? Apparently not. Dalton insisted in his blog
following the report “We don’t need the
Government to monitor whether insurers are delivering on our commitments..”

No, they don’t – because they
already have ministers prepared to shut out any other views and dance to
insurers’ tune. Not only was the Committee surprised at what the Government had
been prepared to do without any reliable statistical basis, but it said:

“We were disappointed to hear from witnesses
from the legal profession that they had not been invited to the Prime
Minister’s summit and nor are we aware of any substantive contact with DFT
ministers. This is particularly
surprising given that legal reforms were clearly under discussion.”

Huddles.

The big agenda here is to raise
the small claims limit and get lawyers off the scene so that insurers can take
advantage of unrepresented claimants and undersettle their claims (see Whiplash backlash). The Committee recognizes
the serious menace here:

“We believe that access to justice is likely
to be impaired, particularly for people who do not feel confident to represent
themselves in what will seem to some to be a complex and intimidating
process. Insurers will use legal professionals
to contest claims, which will add to this problem.

It would be financially difficult for many
solicitors to assist litigants fighting personal injury claims using the small
claims procedure, given the limited fees available.

…we are concerned that some claims
management firms might find a way to enter the process, fuelling another boom
in their activities.”

This has so long been the agenda
of insurers. Third party capture is another subject in itself but for an overview
on the importance of the small claims limit see Five grand.

Anyone who thinks perhaps this
may have been a catharsis should take into account the claim by Dalton in his
post-roasting blog that the report “reflects
how finely balanced views are on whiplash reform”.

And this truly is the problem. Little
wonder that the verdict of the parliamentary select committee is:

“Transparency
breeds trust and confidence in the market.
Unfortunately, the motor insurance sector remains as opaque as
ever. This needs to change.”

Wednesday, 7 August 2013

The headlines seem
to be that it represents exploitation by unscrupulous employers. There are sorry tales of vulnerable
youngsters kicking their heels at home, or wherever, waiting for a phone call
to tell them when, if at all, they will be required to work.

From what I have
seen and heard there is an inference at least that the employees are obliged to
keep and make themselves available and not to decline any offers of work. This
apparent inequality is presumably the perceived evil of the whole concept.

I don’t think that
the world is getting a true picture here, or that is it anywhere near as
beastly as the media (and those feeding them) would have it.

I have been involved
in these flexible working arrangements for over three years, both within my own
business and on behalf of clients. Last
year we litigated to a full tribunal hearing a claim from a ‘consultant’ that
he was in fact an employee at the time my client terminated a signed contract that plainly recorded that he wasn’t.

It wasn’t quite so
simple as that though at the end of the day he failed.

Employment - and to
an extent tax - lawyers have been wrestling for years with the distinction
between a contract of service and a contract for services.

Every now and again
the senior courts have produced a judgment that considers key factors such as
personal service, control and mutuality of obligation. Most employment lawyers will probably agree
that noble efforts have generally resulted in the conclusion that every case
turns on its own facts.

Not a great deal
more clarification has emerged from a spate of recent cases that culminated in the highly
entertaining, er, position of lap dancer Nadine Quashie who, ultimately, was
not employed by 72 year old dad, Peter Stringfellow.

It is perhaps a
little simplistic but legal analysis identifies an employment contract at one
end of the scale, an independent contractor arrangement at the other and
somewhere in between this zero hours
concept.

In many situations
it is like the proverbial elephant – you will know it when you see it. If you called a plumber, to fix your pipes,
you wouldn’t expect him to claim subsequently that he is entitled to employment
rights.

There are
definitions of these arrangements that occupy the twilight zone in between but
to my mind they are somewhat fickle because of the variety. One of the difficulties one has in conducting
any legal analysis is that the labels used may not be accurate.

What one person
thinks is a ZHC may be a consultancy agreement or an employment contract in the
eyes of another and vice versa.

But let’s get back
to the point of this alleged scandal - the notion that people are being
chained to a post or locked in a room until they are needed and then let out
and paid (no doubt a pittance) for doing only as much as the gangmaster
requires.

First, I doubt that
in many if any cases that is actually what is agreed, whether it is verbal or in
writing. Far more likely that there is
entirely even-handed mutual lack of
obligation.

In other words,
whilst there may be no guarantee of work, there is probably also no obligation
on the worker to be available.

Secondly, that may
be a choice that the worker makes – because there is nothing better at the
present time. Of course, they would like
a full time job that pays even when they are sick, on holiday or sat at work
with nothing to do.

The reality is that
employers in the current climate can’t afford to run businesses in that
traditional manner. Within many legal
practices over the last two or three years there has been a shift to the use of
independent consultants who work for two or more firms, neither or none of
which is able to offer a full time position or even commit to relatively
certain part time employment.

In my experience
this works happily enough. The workers
are only too glad of a structure in which they can secure a full week’s work,
whether it be at two, three or more locations.

The lack of mutual
obligation is on the face of it a weakness, but in reality a strength. What happens is that both sides build a bond
of goodwill and cooperation which is potentially stronger than any written
contract.

A worker who turns
down assignments on a regular basis can only expect that the employer, who has
no duty to offer work, will tire of rejection.
Similarly, a consultant who is not fed regularly will forage elsewhere.

The reality of the
young kids waiting for the phone call from Burgerland or wherever is probably
that they have no choice but to be at beck and call, because there is nothing
else available. If there is something better on offer then they
should go get it.

In my experience
there are many plus points to flexible working arrangements that, whatever the
precise terms or labels attached, don’t amount to employment contracts. Aside from the creation of opportunities
where none would otherwise exist, there are spin-offs such as the sense of
fulfilment and self-respect that individuals enjoy within their micro-businesses.

One suspects that the
most enthusiastic contributor to the debate – whether or not the input is visible
–will be the Treasury, having felt the impact in cash flow terms of many tax
payers switching from Schedule E to Schedule D.

The climate is
changing, we are told, and it may be commercial forces rather than political debate
that see a swing back towards more familiar master and servant relationships. Ironically this will be at a time
when our government has to a large extent destroyed the measure of security that was for employees its most coveted feature.

Saturday, 3 August 2013

The Association of British Insurers ("ABI") is all in a fluster about the Law Society's ("LS") "Don't get mugged by an insurer" campaign, designed to raise awareness of the dangers of dealing direct with insurers to settle injury claims.

ABI Director-General Otto Thoreson has complained that the LS initiative is "little more than public name-calling". Ironic that, given the ABI's record, including such recent references to "ambulance-chasing lawyers" as that of Thoreson's eminent colleague Nick Starling only three months ago - see Better deal for claimants etc

So, they don't like it when the boot's on the other foot. Perhaps it's fitting, in the context of a debate focussed largely on motor insurance, that Mr Otto Thoreson is an anagram of 'tormentors hoot'

But all this fuss distracts from the message, which is hugely important, that accident victims who use a lawyer recover two or three times more money on average than those who handle it themselves.

This isn't particularly surprising. Sure, many of us enjoy a spot of DIY here and there but we can't all be experts. Some folk think they can negotiate the best deal going - and they'll probably live in bliss afterwards. Most recognise that they know nothing about the law or its processes.

Inevitably then it's an uneven contest, injured Joe Public v professional claims handler. If both sides play their best game who's going to win? Who's going to get thrashed?

This is the point at which you have to shut your eyes ever so tightly and believe...

Insurers have explained time and again that it's fine - nobody will get stung - because they will deal fairly with claimants and ensure they get what they are entitled to as a matter of law.

Never mind the (allegedly) rising costs of dealing with claims, overheads, the demands of shareholders in a lean market. The expert claims negotiators will shut those things out of their minds even when faced with the opportunity to pay only a third or less than a case is actually worth because the DIY claimant doesn't know what he or she is doing.

Still have your eyes shut tightly? Can you smell something typically rural?

These people will indeed mug you if you're in strange territory and don't know what you're doing but because they have more neck than a bag of giraffes they insist to our gullible government that they will deal fairly with unrepresented accident victims.

I have never had a case yet where I haven't recovered more money than an accident victim has been previously offered in the course of dealing direct with insurers or using one of the panel firms who pay (sorry, I mean used to pay, of course) referral fees to buy the work. Usually, it's a lot more - proving the point of the LS campaign.

The dangers of trusting and dealing with these entirely self-interested people are starkly illustrated in such cases as that featured in Foxes & chickens. "Such a nice man, he was". Mugging an injured teenage girl of over £30,000, he was. Despicable.

Ordinary folk believe the lies and there's nobody able to watch and listen to what goes on in every situation. See Livin' Aviva loca.

Running a DIY injury claim is like taking a night stroll through the rough end of a strange town. If you don't get robbed, it will be a small miracle. Don't go there without a guardian.

Friday, 2 August 2013

Congratulations night club tycoon Peter Stringfellow - a dad again at the age of 72.

Kids are the very best thing to have in life, no doubt about it. I also subscribe to the view that by and large you can't get enough of a good thing.

But I'm not inclined to have more now - and I'm 20 years younger than the colourful son of Sheffield. It doesn't seem to me a responsible thing to do.

A couple of years ago - when my (also younger) wife was toying with ideas of a fourth - I looked at it from the point of view that I'd be eligible for state pension by the time my child was mid-teens and at the height of awareness, fitness etc.

I'm giving away no secrets but plainly 'er indoors is not 40 years my junior. At 32 or thereabouts, Bella Stringfellow need have no worries about chasing toddlers in her bathchair.

But what about her old man? Will he - at 88 years old - be on any level with his 16 year old daughter?